Quantcast
Are you getting the best rate from your broker?
Compare your broker's rates now to find out if you can save money

Choose your broker below
Welcome to Dividend.com. Please help us personalize your experience.

Select the one that best describes you
Dividend logo

Chevron (CVX ) is being downgraded from 3.5 to 3.4. The stock was recommended as a Best Dividend Stock on April 11, 2014, at a price of $116.69 and has since paid a dividend of $1.07 eight times totaling $8.56. Its current price is $103, yielding slightly higher than 4%.

Here are two of the main reasons we have downgraded Chevron:

  • Earnings Growth – An abnormally high earnings expectation in the calendar year 2017. The FY 2016 EPS estimate is $1.41, while analyst estimates for FY 2017 are $4.53 (as of today), resulting in an abnormally high earnings growth estimate of more than 200%. This is not a typical characteristic for an income stock, which typically generate single-digit growth estimates.
  • Payout Ratio – The company is burning through cash at a rapid pace. Since 2012, the company’s available cash reserves have fallen from approximately $20 billion to roughly $11 billion. It needs approximately $8 billion of cash just to maintain its current payout ratio, which is higher than 200% based on the 2016 EPS estimate of $1.41. This is concerning in terms of potential CAPEX spending.

Income investors would continue to see dividends coming out of this stock but at the expense of expected high stock price volatility.

Our last two upgrades for 2016 are up 10.3% and 10.67%, respectively, excluding dividends. You can read a full analysis of these upgrades in our previous upgrades/downgrades below.

Click Go Premium to start your 14-Day FREE trial and get access to the Best Dividend Stock addition below.

To read the Full Story, Go Premium or Log In

Popular Articles

Premium Shutterstock 412610572
News

The Market Wrap for January 19: Investors Pay No Attention to Possible Government Shutdown

Despite the possibility that the U.S. Federal Government is once again going to shut down on...

Dividend Investing Ideas Center

In Spite of the 90% Rule, Why Do Some REITs Have Poor Payout Ratios?

Real estate investment trusts (REITs) have grown in popularity since the financial crisis, so...

Premium Shutterstock 660345283
News

Just Work Longer

Despite the recent gains in the market, Americans are still facing a decent-sized retirement...